Even though it’s not expected to be profitable until 2022, Seattle Genetics Inc. (SGEN, Financial) continues to generate strong investor backing. Shares of the 27-year-old Bothell, Washington-based biotech have shot up more than 140% in the past year.
The stock climbed about $15 this week alone as the company beat earnings estimates and reported sterling sales of the new bladder cancer treatment Padcev, which the company co-developed with Astellas Pharma Inc. (TSE:4503, Financial) of Japan
Padcev just received approval in mid-December. Yet, in the first quarter, the newcomer recorded sales of more than $34 million. FiercePharma reported that number surprised JPMorgan analyst Cory Kasimov. In a note to clients, he wrote the therapy “blew out expectations…exceeding consensus estimates" by four- to fivefold.
SVB Leerink’s Andrew Berens had set the bar even higher, with an estimate twice Kasimov’s. The drug beat his expectations by $10 million, an accomplishment even more impressive given it occurred in the face of the Covid-19 pandemic.
Based on the blockbuster first quarter, Berens upped his 2020 sales target for Padcev to more than $221 million, adding that at its peak the drug could eventually generate revenue of $2 billion.
It gets better. Seattle Genetics and Astellas are trying to get the OK to use the drug in previously untreated patients. Bernes said that indication could be a nearly $6 billion opportunity. And that estimate doesn’t even include revenue that could come from using the medication in earlier stages of the disease. In fact, Padcev, in combination with the Merck & Co. Inc. (MRK, Financial) drug Keytruda, is being tested for use in muscle-invasive bladder cancer.
The company now has three Food and Drug Administration-approved drugs. In mid-April, the FDA green-lighted the company’s breast cancer drug for an especially aggressive form of the disease. The approval came four months early. The treatment, called Tukysa, is approved to be used in combination with two other therapies.
There was one sour note in the first quarter. The company’s cancer drug Adcetris fell just short of expectations, coming in with sales of $164 million.
Consensus from the 19 biotechs analysts is Seattle Genetics is getting close to breakeven status, according to an article in Simply Wall Street. They think the company’s final losing year will be next, with profits of nearly $190 million in 2022.
Seattle Genetics is an anomaly among biotechs in that it currently has no debt on its balance sheet. This allows the company to operate purely on its equity investment. Having no debt removes the risk of investing in a company that has yet to turn a profit.
The company also received a big vote of confidence from institutional investors and hedge funds, which substantially upped their positions recently. The latest tally showed that more than 90% of the company’s shares are owned by institutions.
Disclosure: The author holds no positions in any of the companies mentioned in this article.
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